Euro Debt Crisis Shifts to Italy

Is this the week that Italian Prime Minister Silvio Berlusconi’s government finally falls? Having escaped by the skin of his teeth on several previous occasions, Berlusconi’s parliamentary majority could crumble during a budget vote on Tuesday, Reuters reports, and a no-confidence vote may not be far behind. Italian papers estimate between 20 and 40 members of Berlusconi’s majority may rebel—enough to topple his government—and he’s working hard to shore up his support. His greatest asset proves to be the absence of a credible rival. Fears are growing in Europe over Italy’s debt after the yield on Italian bonds rose to a euro-era high of 6.4 percent on Friday. Rumors swirled on Monday that Berlusconi could quit by the end of the day, but he denied those reports on his Facebook page.

Greece leaders agreed to form a new unity government, the nation's president said in a statement Sunday. The new government will see that the EU's bailout plan is put into action and oversee new elections on Feb. 19. Prime Minister George Papandreou will resign. Papandreou met with opposition leader Antonis Samaras in an emergency session to discuss the deal, and the prime minister had agreed to resign if leaders reached an agreement for a temporary government. Samaras refused to participate in further talks unless Papandreou’s resignation was on the table. Papandreou and Samaras will meet again Monday to decide who the new prime minister will be, and the new government may be sworn in as early as Friday. The favorite for the P.M. position is former Central Bank vice president Lucas Papademos. The government has released a plan of seven steps needed to be taken in the next weeks, including submitting a state budget and having the IMF ratify aid payments. The next step in ending Europe's debt crisis: shifting focus to Italy.

Imagine the politicians of Louisiana, one of America's smallest and poorest states, running up the state debt to half a trillion dollars. Imagine a whole lot of other states in critical condition. Replace Louisiana, Texas, and Florida with Greece, Italy, and Spain, the Northern states with Germany, Wall Street’s banks with those of Paris and Frankfurt, and the Fed with the European Central Bank, and you begin to understand the crisis that’s taking over Europe.